How to Repair America’s Broken Housing System — with Dr. Jenny Schuetz

Dr. Jenny Schuetz, a nationally renowned economist, author, and policy expert on housing and land use, joins Scott to discuss trends and structural shifts occurring in the housing market, America’s broken housing system, and potential policy solutions. Follow Jenny, @jenny_schuetz. Scott opens with his thoughts on FTC Chair Lina Khan’s uncertain future under a second Trump administration. Algebra of happiness: How Scott copes during hard times. Subscribe to No Mercy / No Malice Buy "The Algebra of Wealth," out now. Follow the podcast across socials @profgpod: Instagram Threads X Reddit Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:30Speaker 01

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• 1:30Scott Galloway?

  Episode 325. 325 is your area code covering parts of west central Texas. In 1925, the world's first motel opened. True story, last week I checked into a Westin hotel and I asked if the porn be disabled. Guy looked at me and said, "It's just regular porn, you sick fuck."

• 1:48Speaker 04

  Go, go, go!

• 2:00Scott Galloway?

  Welcome to the 325th episode of the Prop G Pod. In today's episode, we speak with Dr. Jenny Schutz, a nationally renowned economist, author, and policy expert on housing and land use. Well, we discuss with Jenny trends and structural shifts occurring in the housing market, America's broken housing system, along with policy solutions. Okay, what's happening? Federal Trade Commission Chair Lina Kahn's future might be determined by Trump's biggest cheerleader, Elon Musk, or as I like to call him, the First Lady Alania. In the days leading up to the election, Elon Musk wrote on X that she will be fired soon. Oh, great. We have a guy who is addicted to a nonassociative drug determining antitrust and FTC regulation. That makes sense. That totally makes sense.

• 2:45Scott Galloway?

  Both Republicans and some high-profile Democrats, including Reid Hoffman and Mark Cuban, have openly criticized Lena Kahn, accusing her of pushing a far-left agenda and using the FTC power too aggressively. At the same time, she has a lot of, I think they're called cons, or rebel cons. She's like Matt Gaetz, some unlikely fans on the right. And she's, everyone's mad at Big Tech right now. There are a few bipartisan issues. One of them is wanting to break up or punish Big Tech, although none of them get their shit together to actually do that. It feels as if the only things that the far-left and the far-right can agree on and get the five or six centrist people to come along with them on is one, antisemitism. The far-left and the far-right are both antisemitic. And two, reckless spending. $7 trillion in expenditures on $5 trillion in revenues.

• 3:30Scott Galloway?

  Imagine the US was a household, making $50,000 a year, spending $70,000, and our debt is $320,000. But don't worry, we get to keep racking up debt because they keep sending us more and more credit cards, or at least China does, or overseas investors. And guess what? When we die, we're going to have all the champagne and cocaine, and we're going to live large, but our kids get to inherit the household debt. Well, that is what we are talking about now. Anyways, little off-script. Meanwhile, Trump's transition team has tapped the antitrust lawyer, Gail Slater, to help determine Kahn's potential successor. I thought Lena was going to survive this. I thought it would kind of soften his image. She's done a lot of work. I don't think he's going to have the patience or understand things like numbers and concepts and legal jargon.

• 4:13Scott Galloway?

  No joke, in the first administration, when people were coached on how to present to them, they would say fewer words, more pictures. I just don't think he's going to have. The staying power here, maybe he'll hand it over to JD Vance. JD Vance could probably do something here, but what is it they want from her? I don't get it. Oh, they want a kleptocrat. They want, they want her to back the fuck off if you made a campaign contribution. If you said nice things about him and you sent money in, fine. You can do whatever you want, including consolidate the industry and drive up prices, which will be inflationary, folks. By the way, the most deflationary thing we could do right now would be, one, to kiss and make up with China, and two, to break up big chicken, big pharma, big ag, big tech. It's pretty simple.

• 4:54Scott Galloway?

  When there's two or three players, they figure out a way to charge higher rents on consumers. Notice how airline tickets have skyrocketed in the last few years. Why? Because there's basically two or three big airlines now, and they kind of wink at each other and coordinate such that they can jack up prices. Have you noticed that every flight has been full for about the last five years? They keep taking out supply and then they wink at each other and they don't create more supply. Why? That would create pricing pressure. And the CEOs of these companies, who took about $100 or $150 million in compensation pre-pandemic and then cried, cried poor when the pandemic came along and said that we're all in this together until the market is booming again. And then it's, and then it's free market capitalism and I should make $150 million when I'm paying my flight attendant $78,000 a year.

• 5:39Scott Galloway?

  Anyway, another talk show. Who's on the list of candidates that Slater is assembling? Reportedly, the list includes former Justice Department attorney Mark Meder, Medor? Meder? It's not Mark Meadow, I know that. It's Mark Meadow with an R, probably an entirely different person with a different complexion and personality. George Mason University Law Professor Todd Zawicki? Don't know Todd, don't know Professor Zawicki. That's a pretty awesome name, though. Alex Akuliar, a partner at Morrison-Forster, or as I like to call it, mofo. And the FTC's two Republican commissioners, Melissa Holyoke and Andrew Ferguson. Jesus Christ, I'm bored. I'm bored listening to this shit. Are we gonna have to cover the fucking Trump cabinet for the next two or three weeks? Can't he just start imposing tariffs? By the way, what a shocker.

• 6:22Scott Galloway?

  He wants to raise tariffs on Mexico, who, by the way, has become a lot more important to us. I think he's become our biggest trading partner, our biggest... Biggest importer, the country we now import the most from. What's really interesting about trade, or I find it really interesting. And this always blew me away. One of my colleagues, Pankaj Gemawat, did this study on trade and he found that trade is a function of proximity. That generally speaking, almost every nation in the world, their biggest trading partner is when they share a border with. I guess transportation kind of gets in the way or, you know, people intermarry and have no people over there and they develop business relationships. So it just struck me that in a digital age, proximity is still the primary driver of trade. Anyways, this is, we are about to enter into a trade war.

• 7:06Scott Galloway?

  He's talking about a massive deportation force. Jesus, have you seen these people that are lining up for the deportation force? It's literally like, okay, what happens when you're bullied in high school and you finally get your revenge on people? These people just seem so fucking angry. This is really nuts, but let's take inflation and how do we reverse engineer inflation? I know, let's reduce competition. Okay, we're doing that. We're going to get rid of Lena Kahn. Let's make our imports more expensive. Okay, we're doing that. And, and let's find our most flexible agile workforce and terrorize them and make it such that immigrants don't want to come in. And here's the dirty secret.

• 7:46Scott Galloway?

  The migrant problem is out of fucking control and the asylum system that was set up or exploited under the Biden administration was unforgivable and was probably a reason that, I don't know, she lost one brick in the blue wall. This was handled incredibly poorly for the last 30 years and especially poorly the last four years. However, however, what no one wants to say out loud is that immigration, while being the secret sauce of America, the most profitable part of immigration is illegal immigration. They commit crimes at a low rate and they're so worried about getting caught, they don't call the fire or police department. They don't use their services, they don't go to the hospital. And what do they do? But they also get to pay taxes. They pay their taxes. And then when the work or the crops, when the work dries up, you know, grandma dies

• 8:28Scott Galloway?

  or, or restaurants go into recession or the crops are picked, this flexible workforce heads back to their country of origin. And this is literally the thing that has kept on giving or the gift that has kept on giving for the last 20 or 30 years. And that is the reason, actually the last 40 years, why no one ever gets that serious about immigration reform. How come it's always politicized and it never gets reformed? It'll be really, really interesting if that bipartisan immigration reform bill actually goes through. It probably will now, so. Trump can take credit for it. The big picture, with Trump's return to office, sectors constrained by strict antitrust oversight, including tech and healthcare, could see a new wave of merger and acquisition activity. I would imagine Goldman Sachs and Morgan Stanley, stock are thinking that M&A is going to have its sort of M&A palooza in 2025.

• 9:13Scott Galloway?

  The markets have already gone crazy since the election. This week alone, mega cap tech companies added 773 billion. That's right, three quarters of a trillion dollars to their collective market cap, as dealmakers hope Trump's FTC will be more open to M&A than Biden. So according to data from Dealogic, last year hit a low for M&A deals targeting US companies, the lowest since 2015. And this year's pace suggests even fewer deals might be going through. All right, what's going on here? Why is the market screaming up? Is it because they think there's going to be some sort of sustainable or fundamental growth in companies? Have we made massive investments in R&D? Are our products more attractive to overseas? Have we figured out more free trade that'll increase the purchase of our products? No. This is nothing but the following. Trump is a vessel for the transfer of wealth

• 9:58Scott Galloway?

  from young people to old people. The credit markets know it. The tenure spiked about the moment he was going to get elected. The moment I knew he was elected, a friend of mine who runs, who's the chief investment officer for Millennium, 75 billion dollar hedge fund, called me and said, he's won. And I said, how do you know this? I don't see this. He said, the credit markets are spiking, which means they know that he's won because his policies will be more inflationary. Trump is nothing but a vessel. Actually, he's a bunch of things, including he is a vessel for the transfer of wealth from young people to people like me. By the way, I have made a shit ton of money in the last four or five days. And I love it. It's great. I'm happy for it. But guess what? My kids, my kids, well, that's another story. We have to stop this war on the young.

• 10:42Scott Galloway?

  Old people keep voting themselves more money. And young people and middle class people are under the impression that, hey, the deficit never matters. And if a guy's angry, and if a guy's really offensive, he must be a leader. Let's get a strong man. And on the fucking far left, we have decided we're self-appointed social justice cops. No, no one asked us to do that. What is America? America is a platform. It's a platform for two things. One, protect our borders. Army, Navy, Air Force, Marines. Make sure that we are, that Americans are incredibly safe and that we continue to spend more on our military than the next 10 biggest military spenders combined. Why? Because despite what Coca-Cola or Ben and Jerry's would like you to believe, or people

• 11:24Scott Galloway?

  on the far left, the moment a group of people can come for us and kill us and take our Netflix and espresso away, be clear, they will. Job number one of this platform, defend our shores. Job number two, to create atmospherics and environment that provides prosperity, opportunity, growth, innovation, capitalism, boom, profits, such that we can tax them at a fair rate, at a lower rate, hopefully over time, a lower rate, such that we can fund the government with an even lower tax rate because of the growth, such that, such that, young people can have some fucking hope of buying a home, forming a family, having sex, having kids, and getting to the whole shooting match. What is the whole shooting match?

• 12:06Scott Galloway?

  It's not AI, it's not innovation, it's not tax rates, it's not GDP, it's deep and meaningful relationships. And this guy is going to decrease, continue to decrease, the number of households that are formed. We're going to continue to see a continued decline in birth rates. Why? Because all of this economic sugar high, guess where it's going? It's going to the top 1%. Oh my God, the market's touching new highs. Guess what? Who owns 90% of the market? The top 1%. So yeah, it's great for me, it's great for your boss. You know who it sucks for? Everyone else. A vessel for the transfer of wealth from young to old. President Trump. We'll be right back for our conversation with Dr.

• 12:51Scott Galloway?

  Jenny Schutz.

• 12:55Scott Galloway?

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• 13:40Scott Galloway?

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• 13:58Scott Galloway?

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• 14:43Scott Galloway?

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• 15:04Scott Galloway?

  Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentech trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 15:49Scott Galloway?

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• 16:21Scott Galloway?

  Welcome back. Here's our conversation with Dr. Jenny Schultz, a nationally renowned economist, author, and policy expert on housing and land use. Jenny, where does this podcast find you?

• 16:31Speaker 05

  I'm in my office in Arnold Ventures. We're close to downtown DC.

• 16:37Scott Galloway?

  All right, so you recently joined Arnold Ventures, where you're addressing the nation's challenge of housing supply shortages and rapidly increasing rents and home prices. Let's talk about this head-on. How can we repair America's broken housing systems?

• 16:52Speaker 05

  Well, the policy side is actually not that complicated. We need to make it easier to build housing and build more types of housing, especially in high-demand locations. It turns out that the tricky part of this is the politics. We've essentially delegated a lot of control over housing production to local governments and to neighborhoods, and people who live in a neighborhood often don't want to have more housing built.

• 17:15Scott Galloway?

  So my sense is, and you tell me if this is correct, the incumbents, the people who already own homes, have a vested interest in not having more supply. So they get involved in local review boards and basically make it near impossible for new housing permits. Is that a safe thesis?

• 17:30Speaker 05

  It's true that there are at least some number of incumbent residents who don't want more housing and don't want their neighborhoods to change. One of the questions we're grappling with is, how widespread is this resistance to new housing? We're ingrained to believe that NIMBYism is widespread. Basically, everybody who already owns a home doesn't want more housing. But what we're starting to learn as we do more polling and surveys is that NIMBYism may not be as widespread as people thought before. The NIMBYs are loud and they're often very politically well-connected. But there are often a lot of people, including longtime homeowners, who understand that their communities need to grow, need to change. And so part of the challenge is figuring out how to tell politicians that this median voter

• 18:15Speaker 05

  may actually be comfortable with more growth than they've assumed.

• 18:19Scott Galloway?

  Yeah, I think what's happening, I think a lot of people have children who are looking, who are either renting or looking for a home, and they just realize how bad it's become. What are some ideas or innovative policy solutions or economic solutions for? My understanding is a lot of it's a supply problem. We just aren't building as many homes as we need to. What are some policy ideas that you've seen that you think might address the issue?

• 18:42Speaker 05

  There's three buckets of policy changes that we know are likely to be effective. One is just to make it possible to build a more diverse set of housing types. So roughly three quarters of the land, even in major urban areas, is set aside exclusively for single-family detached homes. Those take up a lot of land. They're the most expensive type to buy or to rent. And they also just occupy a lot of space. And so we have neighborhoods that are built out as single-family homes, and you can't add any more until you change the zoning. So legalizing everything from townhouses, accessory dwelling units, all the way up to apartment buildings adds more capacity and more diversity to the housing stock. We also have to look at sort of things like the dimensional requirements.

• 19:24Speaker 05

  So legalizing an apartment building, but capping it at two stories doesn't actually make it feasible. So making it possible to build taller buildings, smaller setbacks, getting rid of off-street parking requirements, all of those sort of details can matter. And then probably the most important thing is actually the process. We have gone to a system where there's a lot of complex discretionary approvals. Neighborhood by neighborhood gets to weigh in on what gets built, provide feedback on everything from the landscaping and the design, the size of the project. Writing down a set of rules that are consistent and objective and letting developers build according to the rules without having this community engagement process that drags on

• 20:06Speaker 05

  forever would shorten the process and would allow more housing to get built more quickly, which means that those units can then be sold or rented at lower prices.

• 20:15Scott Galloway?

  Yeah, I have some experience with this firsthand. I bought a piece of land down here in Delaware, Florida, and we were planning to develop on it, and you have to go to the local review board. And a woman showed up and said, I don't know if I want that land developed. I walk my dog over there. And I'm like, OK, that's called trespassing. But they delayed the decision for a month or three months. These things don't meet that often, to do some sort of review or study based on the fact this woman was walking her dog over there. And it just felt like anyone who shows up can not necessarily kill it, but delay it forever. So my question is, I mean, on a very reductive level, my sense is permits have been taken

• 20:56Scott Galloway?

  out of the hands of officials who think big picture and put into the hands, or at least of homeowners, who can have a lot of influence and just delay the shit. And everything I've done around this stuff or everything I've seen, they basically just delay, delay, delay. And any objection results in a delay of them finally issuing the permits. What can be done? Because my sense is it's very state by state or even community by community. How do you address this? Is there some sort of federal law or state law that expedites? You know, if you will, is a laxative to the constipation here of housing permits?

• 21:33Speaker 05

  Yeah, there's very little the federal government can do. The Constitution doesn't give the federal government control over land use or development or zoning. So that's a power that's held by the states. And sort of what we've seen is this delegation downwards. States delegated land use authority to local governments. Local governments have in turn kind of outsourced this to individual neighborhoods, either formally or informally. And so we've pushed the approval process, or at least the veto power, down to the lowest level of geography and the people who are most impacted by it. So, you know, one thing that local governments can do is just move the timing of when you get community engagement.

• 22:15Speaker 05

  Instead of doing this for every single permit, every single parcel that gets changed, move it upstream to something like the comprehensive planning process. So like every 10 years, the city comes together and says, where do we want to grow? What do we want to add? And once that's written down in the plan, then you don't get to protest every single development and every project. That would make things a little easier. One trend we've seen in the last five or six years is that state governments are starting to reclaim some of the power they delegated to localities. Because states are recognizing the real economic harms of not building enough housing. If you look at places like California and Massachusetts and New York, the state level economy can't grow. They can't attract and retain enough workers because there isn't housing that's affordable at different kinds of income levels.

• 23:00Speaker 05

  And so state governments are starting to put guardrails around what localities can do, setting quantitative targets for how many homes they have to allow, or telling them, you're not allowed to ban, for instance, apartment buildings near transit stations. So I think this is a really promising trend because state governments do have this bigger picture economic impact. And they have the power, if they want to use it, to push back against all of the local NIMBYs.

• 23:24Scott Galloway?

  I think I've heard people reference the mayors in Austin and Minneapolis are trying to be innovative around. Expanding the housing stock or the stock of housing. A, do you know anything specifically about those? Or can you point to other examples of where local officials have shown leadership around this issue?

• 23:42Speaker 05

  Yeah, those are both good examples. Minneapolis was the first city to legalize duplexes and triplexes in all of its residential neighborhoods, which is kind of a modest step. It's a little bit more symbolic, but they also did a lot of upzoning around their new light rail system. So it's very easy and straightforward to build apartments near the transit stations in Minneapolis. And they've in fact built a lot of apartments nearby. And that's been very helpful to providing more supply. Austin is just a growth friendly city. I was there in February of this year and there are cranes everywhere. They are building, building, building. You know, Austin has really embraced the sort of change from being kind of a smallish city, college town to being a big city in its own right.

• 24:24Speaker 05

  And a lot of what this is telling us is if elected officials want more housing to get built, they'll figure out ways to make it happen. If elected officials don't want to build housing, they'll figure out ways to stop it.

• 24:35Scott Galloway?

  I noticed the same thing when I was in Austin, that they have this sort of growth mindset. What about the idea, could the CHIPS Act be a role or be a model? And that, as they just said, we're going to provide subsidies to inspire more domestic manufacturing of key semiconductor technology. What about just straight subsidies that say to a developer, if you figure out a way to navigate these local zoning laws and build more than eight, 10, 12 units, we'll give you 3, 5, 10% tax credit?

• 25:04Speaker 05

  I mean, the problem isn't that developers don't want to build. It's that they can't and that developers don't control the development process. So you know, there's, there's always a worry about subsidizing either demand or giving subsidy to providers, to developers without relaxing the rules may just wind up driving up prices even more.

• 25:26Scott Galloway?

  Let's zoom out. Give us your impression of some of the housing trends by market. Because people will say, you know, it's difficult to. I think make statements about housing across the US because housing in St. Louis, I would imagine, is an entirely different situation than it is in Phoenix or San Francisco. If you were as a, as a housing analyst, what markets do you think reflect the most strength right now, the most weakness? What types of real estate or asset classes are you keeping your eye on? Give us sort of break down, if you will, give us a lay of the land, but be more segmented by region and property type.

• 26:01Speaker 05

  So in the last five years or so, since really since the start of the pandemic, we've seen affordability go from being mostly a regional problem in the high-cost coastal markets to being almost a national problem. And it's not as acute everywhere, but you know, California, Seattle, Boston, New York, for something like 40 years have been underbuilding and have been very expensive. And that's just sort of baked into expectations. Places like Austin, Denver, Nashville, a lot of the Sunbelt metros have historically been really affordable. They build a lot of housing when there's more demand and prices haven't gone up. That sort of broke in the pandemic and it's unclear whether that's a short-term

• 26:42Speaker 05

  problem. Lots of people moving away from California to places like Phoenix because they could buy cheaper homes. Maybe this is going to correct itself. The worry is that some of those places are going to become more like California. You know, if Austin and Phoenix start making it harder to build and in the long run, they stay expensive, that's going to be a real problem for a lot of people. It is certainly still true that a lot of the traditional sort of Rust Belt metros, St. Louis, Cleveland, Pittsburgh, I mean, housing is still objectively a lot cheaper there than it is in most of the country. But those places are also seeing tightening. So we're seeing, you know, Pittsburgh is redoing their comprehensive plan now. They've seen vacancy rates drop in a way that they're not used to seeing and are trying to figure out, how do we get out in front of this?

• 27:27Speaker 05

  So we've seen this sort of geographic convergence, in a sense, and spillover. Looking at sort of different kinds of of home types, the single family home building completely collapsed in the Great Recession. People couldn't get qualified for mortgages. Developers couldn't get money to build. And so if you if you map single family permits and multifamily permits, they both dropped off a cliff in the Great Recession. Multifamily has picked up a lot and the single family has just not gotten back to the levels that it was. Some of this is that, you know, you need more land to build single family. There's a lot of demand for living in the urban core where there are amenities. And that there you're going to be building more multifamily. But some of it also seems to be that it's just harder for people to qualify for mortgages than it used to be.

• 28:12Speaker 05

  And so there's less building of single family that's designed for especially entry level homeownership.

• 28:18Scott Galloway?

  Do you think that young people not being able to pursue, quote unquote, "the American dream" is leading to our polarization and dissatisfaction with life in America?

• 28:31Speaker 05

  It definitely doesn't help. When I talk to people under the age of 40, they are really pessimistic about their ability to buy a house in a neighborhood that's close to jobs and amenities. And, you know, people are just sort of resigned. I'm going to be a renter forever, which isn't necessarily terrible. Right? If there's good quality rental housing in neighborhoods that you like, being a renter allows you to be more flexible, to move someplace for another job. But we're so conditioned to believe that sort of part of becoming an adult is buying a house and having part of the American dream and building wealth. And so people who feel like that's not going to be a possibility are really embittered and not feeling like the system is working for them.

• 29:11Scott Galloway?

  Do you think we need to break out of this kind of zeitgeist that you've failed as an adult or you're not that successful unless you own? My podcast co-host on my other pod, Raging Moderates, is successful. She and her husband make really good money. They live in New York and they've made the conscious decision to leave their money in the market as opposed to put it, you know, buying a very expensive place in Tribeca or wherever. Because they've said the yield, it's just it's just not economic. It's a better deal to rent than to buy. Do you think we just need a change in mentality or mindset?

• 29:44Speaker 05

  So I think we should be a lot more honest about the financial risks and downsides of owning. There's a long tradition among our elected officials from both parties of pushing this idea that homeownership is the American dream and we should get people into homeownership as quickly as possible and renting is sort of second-class status. I will say that for a lot of people, the biggest benefit of homeownership is not that you're going to build a ton of wealth through the equity, but that you have stability and predictability of your housing payments for a fairly long period of time. So if you rent, every year when your lease rolls over, the landlord can raise the rent. If you own, the principal and interest on the mortgage are fixed over generally 30 years.

• 30:28Speaker 05

  One of the things that's coming up, though, with climate change is that property insurance and property taxes are going up faster because local governments have to pay for a lot of these repairs and insurance companies are raising rates pretty quickly. That makes homeownership a little bit less attractive as just a sort of stability of your housing payment system. It's really important that before people buy a home, that they look at where else they could be investing their money. In a lot of markets, particularly these sort of Midwestern cities, the stock market would have performed better than putting your money in real estate and having it all in a down payment. It's inherently risky to invest all of your savings in one piece of property, in one location, in the same regional job market where you work.

• 31:13Speaker 05

  So there's a lot of risk involved and we haven't really been that upfront with people about it.

• 31:18Scott Galloway?

  And generally speaking, looking at the yields or the ratio of rent to ownership, is it generally speaking better to rent now across the nation? Or have rents kept pace with the same escalation in home prices?

• 31:31Speaker 05

  That really varies across markets. So places like Austin that have built a ton of housing, rent inflation topped out during the pandemic and has slowed, and some of them are actually seeing softening of rents. You might be able to get, say, one or two months free rent when you sign a new lease. But in places like California and New York that have not built enough housing, rents continue to go up much faster than income. So it's still the case that homeownership is a better deal financially in some markets than others.

• 32:00Scott Galloway?

  And what about in these kind of climate-affected areas where people can't get insurance? How is that impacting the housing market?

• 32:07Speaker 05

  We're just starting to see that now. Florida is certainly ground zero for this. Insurance premiums are going up on owner-occupied properties and going up on rental properties. So landlords are having to pay higher rates as well. In some places, people are going to have a hard time getting insurance at all, or the insurance is not going to cover the full replacement cost if there's damage. We are seeing some people who just choose not to have insurance. So if you don't have a mortgage, nobody forces you to buy property insurance, and you may just go without. We see, unfortunately, a lot of that among some of the older mobile home parks, because people don't have to, they don't have a mortgage, they don't have to have insurance, but then they have nothing when a disaster strikes.

• 32:50Speaker 05

  We may also see some wealthy people who just choose to fully self-insure. If you have a lot of money saved up and you really want to live close to the ocean, you might be willing to live there and just accept that you're going to have to rebuild your house from time to time and pay for it out of pocket.

• 33:05Scott Galloway?

  We'll be right back.

• 33:10Speaker 00

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• 34:09Scott Galloway?

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• 34:50Scott Galloway?

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• 35:17Scott Galloway?

  So back in 2022, you spoke with Ezra Klein about how progressive states struggle more with homelessness. Why do you think that is? And why haven't things changed? You just, I mean, you just hear so much about the home. Well, I see it when I'm in Seattle, when I'm on these West Coast, quote unquote, progressive cities. You just see such extraordinary, such an extraordinary homeless problem. Why is that?

• 35:41Speaker 05

  Many of the progressive cities and states are the ones that have made it the most difficult to build housing. Fundamentally, the number of homeless people is a function of the number of people who can't afford the rent or the mortgage. So expensive places have higher rates of homelessness. People are falling into homelessness much faster because their housing unstable and they're spending a lot of money on income. There's this weird relationship with why progressive places have made it the hardest to build. Some of this goes back to some of the big social trends of the 1960s and 70s. Giving communities a voice in what gets built and in what gets torn down very much comes out of a reaction to urban renewal. You know, the federal government tore down a bunch of black and brown neighborhoods

• 36:25Speaker 05

  in cities to run highways into the downtown areas, and they didn't talk to the communities that were displaced, right? The federal government just came in and took your house and tore it down and ran in a highway. So the sort of community empowerment comes out of a reaction to that. In California, California was the first state to pass a statewide environmental protection law, SEQA, which initially was supposed to protect environmentally vulnerable places, but now has really become weaponized so that people can sue to stop a bike lane or infill development or affordable housing on the grounds that it's going to create more traffic or that it's going to disturb their view. So a lot of the sort of good impulses in the progressive movement have now been weaponized

• 37:10Speaker 05

  by some of the most affluent and well-organized communities to stop poor people and to block projects often that have big environmental benefits.

• 37:18Scott Galloway?

  And there's been a lot of controversy about institutional buyers coming in and buying up apartments or housing. And, one, do you see it as a bad thing? Or is it just additional source of capital that should inspire more supply?

• 37:31Speaker 05

  So I don't think we should worry about the sort of legal entities that are buying housing as much as we worry about the ways that housing is being provided. There are sort of a couple of reasonable pushbacks against private equity in particular buying up homes. One is that in some cases, they've not been great landlords. They provide poor-quality housing, they don't fix maintenance issues, they're not responsive to their tenants. And, you know, tenants have a right to good-quality housing and good treatment, but that's true whether your landlord is a private equity firm, or a mom-and-pop landlord, or for that matter, a public housing agency or a nonprofit, and we should enforce these rules across all kinds of landlords. There's also been concern that private equity has a lot of cash. And when they go in and they're buying up properties for cash,

• 38:16Speaker 05

  they can outcompete first-time home buyers who need to get a mortgage. Again, understand that that's definitely a pain point. But then we should also worry about things like boomers who are retiring and selling their primary home and using cash to buy a second home. If it's cash buyers, then again, this applies across all different kinds of entities. So my sense is we're scapegoating private equity because it's a convenient villain. But even if you banned all of private equity from buying up housing, that wouldn't alleviate the housing shortage and that wouldn't reduce rents and prices by very much.

• 38:50Scott Galloway?

  And I think people forget, didn't a lot of the institutional buyers get basically their face ripped off and had to sell these things at a loss, creating more cheap supply? Doesn't it swing both ways when you have institutional buyers?

• 39:01Speaker 05

  It does. Some of them are good at buying at the bottom and selling at the top, and others mistime the market, just like any other investor. In the wake of the Great Recession, there were a number of markets that had really high vacancies and a lot of foreclosures. And remember that nobody could get a mortgage, and so you had to have cash to be able to buy. A bunch of the big institutional investors went into neighborhoods that had foreclosed and boarded up homes, bought them, and at least rehabbed them enough to be habitable, got renters in. So they stabilized some of the neighborhoods that were hardest hit. You may argue, you know, we'd like them to sell to homeowners once the mortgage markets loosen up. But they did perform a really important service because they have access to capital when other people don't.

• 39:42Scott Galloway?

  What do you think of these sort of cities and startups where, and my understanding is there's certain big swaths of land in California and other states that have been incorporated by investors. And my understanding is one of the motivations or the opportunities they see is a lack of zoning and the ability to just, you know, kind of build, baby, build. What do you think of these sort of startup cities?

• 40:01Speaker 05

  So there's a big one outside of the Bay Area that's gotten a lot of political pushback. My sense is part of the problem there is that there was intentional secrecy on the front end. So they were buying up a lot of land and trying to develop plans for this without revealing who was behind it. And that comes across as secretive and undemocratic. And so people are kind of nervous about this. We do have older examples of planned cities. So Celebration in Florida, Columbia, Maryland, Ruston Town Center in Virginia, where there was a big master planned city. Many of those are lovely places to build and people want to be in a place that has housing and restaurants

• 40:45Speaker 05

  and public space and parks. And there are some efficiencies to doing these in kind of large scale. We see that also within neighborhoods within cities. You know, in Washington DC, where I live, a number of the big new neighborhoods around Union Market and the Navy Yards Ballpark, those were done as big master planned communities. So those can be really nice places and you have some economies of scale and the infrastructure is provided. I think the sort of concern of are private companies doing this going to be accountable to voters is worth a conversation. I'm also a little skeptical that you can build a city and fill it with tenants who won't at some point then want to take control over the democratic process. So maybe you build, you know, Forever California,

• 41:29Speaker 05

  10 years down the line, the people who've moved in there decide they actually don't want to continue building housing and they turn into NIMBYs. That strikes me as a very plausible outcome down the line.

• 41:39Scott Galloway?

  When I look at the impacts in the economy coming out of COVID, it feels like the real structural enduring change is remote work, more so in the US than in Europe and other parts of the world that where you see vacancy rates are back to kind of the normal levels in commercial real estate. But in the US, it seems that a lot of people have gotten very used to remote work. Is there perhaps just an entire structural shift that will step change up the value of housing? Because people are just spending a lot more of their waking hours in their home?

• 42:10Speaker 05

  Yes, and we have probably seen some of that already. So there's some good research that shows that about 20% of the increase in prices nationally is due to remote work by high-income workers. So it's not just that people are working from home, but it's the most affluent workers who want more space to have a home office, or just more space to spread out, and they're really driving that. So in metro areas with higher rates of work from home, we see bigger spikes in housing prices. I will say that they're sort of a flip side, which is the opportunity from reimagining a lot of the office-heavy downtowns. It's not quick and easy to convert an office building into residential, but this does

• 42:54Speaker 05

  open up more buildings and in some of the city centers that have a lot of amenities. It's probably going to take five to 10 years before we see substantial numbers of homes, and they're not going to be cheap, but that does mean that we've got some places we can reimagine.

• 43:08Scott Galloway?

  And I realize this isn't your domain, but I can't resist asking, any thoughts, about a year ago, there was all of this speculation that some of the second-tier regional banks were going to go out of business because they had all this commercial real estate on their balance sheet. And it doesn't feel as if we've seen the meltdown. We've seen vacancy rates be stubbornly high in commercial real estate, but we haven't seen this sort of meltdown similar to the subprime crisis in 2008 that was being predicted in the commercial real estate market. Any thoughts on the state of commercial real estate right now?

• 43:41Speaker 05

  That's going to look different across markets, too. Even for things like office vacancy and retail vacancy, some cities have held up better than others. So places like San Francisco and New York still have some of the highest office vacancy rates, but that's fundamentally very expensive land, and somebody is going to figure out something to do with that land and those buildings to make money off of it. You know, many of the sort of the smaller markets, you know, the Sunbelt never had as much work from home. And those office markets have held up much better. Regional banks tend to loan for both for acquisition and for development and the loans on on commercial properties in their home region. So, you know, maybe the regional banks that are lending on San Francisco

• 44:26Speaker 05

  real estate are going to take more of a hit. But again, those are pretty diversified in big economies. And so, you know, without speculating too much, it's not clear that we're going to see a giant wave of bank failures, primarily because of commercial real estate.

• 44:41Scott Galloway?

  So just a couple of theses, and I want you to respond to them. One, it feels as if so, life happens, death, disease, divorce, that all of these homes are these kind of unexploded devices called a mortgage at two and a half percent where they can't leave. At some point, as those mortgages start to come due, or they need to turn them or refinance them, at some point, when you just got to move back to be closer to your aging parents or you need a bigger house. There's my understanding is the housing we've never seen. We're at kind of a historic trough in terms of housing sales right now. Do you see pent up demand and what might be like a kind of a housing liquidity or sales boom in the next one to three years? It just feels at some point the dam has to break.

• 45:26Scott Galloway?

  Or is this just a structural shift where people are going to stay in their homes for much longer?

• 45:31Speaker 05

  People will move eventually. People do decide they're they're just going to take the hit and they will move to something that's going to have a higher interest rate if they really need to. So I think that's right. When people have life circumstances, they will change. Interest rates will come down in the next couple of years. We don't know how quickly and how far. But that loosening up is probably going to open the spigot a little bit and people will get more flexible. The other option is that people do what they did in the Great Recession. You have to move for a job related change or a family change. But rather than sell your old house, you rent it out. So part of the uptick in single family rentals is actually just normal people who are renting out their other home that they used to live in.

• 46:15Scott Galloway?

  Curious to get your take on a specific type of property. My thesis is that the fastest growing demographic isn't seniors or Latinos. It's billionaires or very, very rich people. I think inequality is only going to get worse. And you're going to continue to see the quote unquote really aspirational high end places, whether it's, you know, certain parts of LA, certain parts of New York. Although as someone who's owned in New York, the middle state market has been kind of flat for the last decade, but kind of the the 1% communities are going to outpace everywhere else just because of income inequality. Your thoughts?

• 46:50Speaker 05

  We're seeing that in markets that really cater to high end homes. So one of the other trends that came out of the pandemic was a real spike in demand for housing in places like Aspen in upstate New York and a lot of the rural resort communities. And those are some of the hardest places to grapple with this because you have very wealthy people buying vacation homes and second homes with essentially no price cap. And you also need to have a bunch of not very well paid workers who serve in hospitality and retail and food service who can't live anywhere close to there. So I think those are sort of one of the the early examples that we're going to see this inequality. You may get to some broader

• 47:29Speaker 05

  realization that we have to have workforce housing for regional economies to work, including in some of these resort areas and in major cities. The regional economy just doesn't function well if you don't have enough housing, middle income and for lower wage workers. We may get to a breaking point in sort of political realization, but I don't think we're quite there yet.

• 47:51Scott Galloway?

  Dr. Jenny Schuetz is a nationally renowned economist, author and policy expert on housing and land use. She recently joined Arnold Ventures as Vice President of Infrastructure for Housing. She joins us from her office in Washington DC. I love how just sort of sober you are about this. Really enjoyed the conversation. It's such an important topic and we need more thoughtful voices weighing in. Appreciate your time.

• 48:13Speaker 05

  Thank you.

• 48:25Scott Galloway?

  Alsuburb Happiness. This has been a rough week for me. I didn't realize how much the election was gonna fuck with me. I was very invested. Was I invested in Vice President Harris? Not really. But I have never supported a candidate initially that ended up getting the nomination. I supported Michael Dukakis in 1992. Ask Your Parents. Most recently, in the 2020 election, or 2020, I supported Michael Bennett. So I don't have a great track record of picking candidates, and Vice President Harris wouldn't have been my pick. I'm not here to talk about why she lost, or how he won. I'm here to talk about what I do, and I feel myself going into a bit of a tailspin. And I've talked about this before. My acronym is SCAFA. Now, how do I identify? I start getting quiet.

• 49:10Scott Galloway?

  I start getting angry. I start being curt. I start getting very upset at myself. And I feel I recognize, okay, I'm going into a tailspin. And I implement this acronym called SCAFA to try and snap out of it. S-C-A-F-A. S for sweat. I find working out and sweating kind of resets your system, if you will. C for clean. I try to eat at home. When you eat out, it's buttery, it's salty, it's sugary. It's just not good for you. A, abstinence. Not the abstinence most people think, but abstinence from alcohol and THC. I like alcohol. I like THC. I'm good at both of those things. They've enhanced my life. But when I'm not doing well, I try to just give my sensors a bit of a break. F is for family. I try

• 49:54Scott Galloway?

  and be around my family, specifically my boys. Not because they're so wonderful, but mostly because they're oftentimes very awful. And being around my kids forces me to be out of my head, thinking about how bad I feel, because they command, or demand, I should say, my total attention. And also, on occasion, they are pretty wonderful. And then A is for affection. I get a lot of affection. It sounds weird for my dogs. My dogs are always up for laying on me and playing with me and letting me pet them. And I think my kids sense when I'm not feeling well. And I'll say, I'm not doing great. Can we watch TV or something? And they'll sit down and just sort of instinctively flop their legs over mine. And it just feels very nice. And most recently, this time, something that gave me real moments of peace, real moments of peace, was music. And I'm gonna play some

• 50:39Scott Galloway?

  of that music now. We had these two, I found, I stumbled upon these two wonderful songs. The first is the cover, or a cover. For the English Beat, Save It For Later, from their Special Beat Service album. Was it called Special Beat Service? Anyways, great album. Reminds me of my friend Lee. We used to go to Vegas in his red Jet. I'd get $40 at the ATM and head to Vegas. And we'd listen to that album, The Whole Way Out. And Eddie Vedder at Pearl Jam does a wonderful job covering it.

• 51:26Scott Galloway?

  And then this other one I found on Threads, and we'll play it for a few seconds as well, is a it's a cover of America's Ventura Highway by this band called Penelope Road. And they look like three high school boys. And it's just so lovely.

• 52:04Scott Galloway?

  Anyway, so I hope that you are doing well this week. I am doing better. I'm getting out of the house. I'm getting more sunshine. I'm socializing, which helps. And I'm I can feel myself back on an upward spiral. But if you are struggling with this or anything else, find, A, recognize it, admit it, and find your own acronym and spin your way out. But in the meantime, enjoy these two wonderful covers.

• 52:29Scott Galloway?

  This episode was produced by Jennifer Sanchez and Caroline Shagerin. Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn. And please follow our Prop G Markets Pod wherever you get your pods for new episodes every Monday and Thursday.